Securities Transaction Taxes
An Overview of Costs, Benefits and Unresolved Questions
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Paul J. Seguin
Michigan, Ann Arbor, MI 48109
Financial Analysts Journal, 49 (September/October 1993) 27-35
Reprinted in Securities Transaction Taxes: False Hopes and Unintended
Consequences, Suzanne Hammond, ed., (Chicago: Catalyst Institute, 1995), 1-26
This paper provides an overview of the arguments for and against a Securities Transaction Tax
(STT). Most agree that such a tax will have adverse effects on the liquidity of the affected markets, and
probably on asset values. There is debate about whether this type of tax on capital is an effective or
desirable method of collecting revenue and controlling price volatility. It would be difficult to design a tax
that did not provide strong incentives to seek alternative trading methods or markets for tax avoidance.
The distortions created by taxation and avoidance are likely to be large.
Key words: Liquidity, Market Efficiency, Tax Incidence, Distortions, Volatility
JEL Classifications: G28
Cited 3 times in the SSCI through April 1996
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